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2000-04-11II ,II i i I Il,, 1, ,[ I ,~, I-IP, A - Pg£LkL M gTINC, - M RIL 11, 2fifi The Housing and Redevelopment Authority of the City of Mound, Hennepin County, Minnesota, met in a special session on Tuesday, April 11, 2000, at 6:30 p.m., in the Council Chambers at 5341 Maywood Road, in said City. Those present: Chairperson Pat Meisel; HRA Board Members: Andrea Ahrens, Bob Brown (arrived 7:00), Mark Hanus and Leah Weycker. Also in attendance were Acting City Manager Fran Clark, City Attorney John Dean, City Planner Loren Gordon, Mound Visions Coordinator Bruce Chamberlain, James D. Prosser of Ehlers & Associates, Inc., Bill Beard and Paul Ganst of Beard Group, and Secretary Sue McCulloch. Others present: Jim Albrecht, Klm Anderson, John Beise, Kristin Beise, Orv Burma, Jane Carlsen, Martin Carlsen, Ken Custer, Sally Custer, Patti Dodds, Micheal Durrell, Wayne Ehlebracht, Lorrie Ham, Kandis Hanson, Bob Johnson, Vern Hanson, Irene Harrison, Pat Harrison, Colleen Hendricks, Ann Hiltsley, Jo Longpre, Peter Meyer, Bill Netka, Dorothy Netka, Larry Olson, Todd Rask, Linda Skorseth, Maylene Stociley, Stan Stociley, Stan Stanley, Dean Sulander, Craig Watson, Elsa Watson, Betty Weiland, Frank Weiland, Tim Williams. Consent Agenda: All items listed under this Consent Agenda are considered to be routine by the Housing and Redevelopment Authority. There will be no separate discussion of these items unless a Councilmember or citizen so request, in which event the item will be removed from the Consent Agenda and considered in normal sequence. Chairperson Meisel called the meeting to order at 6:35 p.m. TAX INCREMENT FINANCING. 1.0 APPROVE MINUTES OF MARCH 28, 2000. MOTION by Weycker, seconded by Ahrens, to approve the minutes of March 28, 2000. The vote was unanimously in favor. Motion carried. 5-0. 1.1 REVIEW OF POLICY ISSUES RELATED TO THE LAKE LANGDON AREA DEVELOPMENT AGREEMENT. Chairperson Meisel announced prior to any discussions of this matter, she would read the following statement that has been dated and signed by her, Pat Meiseh On May 11, 1999, I made written disclosure to the Board that Paul Meisel and myself were the owners of real property within the Lake Langdon district; and that we were considering a possible affiliation with Mound Mainstreet, Inc. in connection with redevelopment in the Lake Langdon district in the event Mound Malnstreet, Inc. was selected as developer by the HRA. MOUND HRA MINUTES - APRIL 11, 2000 That disclosure should be treated as continuing; and accordingly, I will not participate in the HRA discussions regarding entering into an agreement with Mound Mainstreet, Inc. for the development of the Lake Langdon District, nor will I participate in any vote on that matter. I ask that the clerk enter this statement in the records of the April 11, 2000, I--IRA Board meeting. Chairperson Meisel stepped down as acting Chairperson and HRA Board Director Hanus assumed the responsibilities as Acting Chairperson. Acting Chairperson Hanus stated the City Attorney would present this matter in a broad sense and then have it detailed by James Prosser of Ehlers & Associates. The City Attorney stated the City of Mound has been negotiating the terms of the redevelopment agreement with Mound Mainstreet, Inc. for the passed two months and approximately one year ago the City entered into an exclusive rights agreement that selected Mainstreet, Inc. as the potential developer for Lake Langdon. Now that final negotiations are being actively pursued, there has been two fundamental policy issues the developer would like to renegotiate and would like direction from the HRA Board. These two areas are (1) timing of HRA economic participation and (2) relationship of Lake Langdon and Auditor's Road. The City Attorney stated both of these are risk assignment issues. The City Attorney explained the timing of HRA economic participation area the developer would like to renegotiate involves the "pay-as-you-go" financing, which is recommended by the HRA and this causes the developer to receive economic assistance from the tax increment generated by its development. He stated under a pure "pay-as-you-go" scenario, the developer is required to bear the initial cost of development activities such as site assembly and preparation. The Preliminary Agreement with Mound Mainstreet, Inc., which predates the guidelines, contains an expression of willingness to consider other options. The City Attomey stated departure from the pure "pay-as-you-go" format means that the HRA puts money into the development, such as from bonds, in the expectation that it will be reimbursed from the tax increment generated. Consequently, the HRA assumes the risk that the development will be constructed and will generate tax increment through tax payments. If sufficient tax increment is not available, the HRA either loses its investment, or in the case of bonds, may need to levy. Ordinarily, when HRA's do advance money to a development, the agreement contains various provisions that are designed to provide security in the event of a tax increment shortfall. The City Attorney stated before we are able to conclude an agreement with Mound Mainstreet, Inc. it could be necessary to advance money, but limit the advance and the form of security that would be required. 2 MOUND t-IRA MINUTES - APRIL l I, 2000 The City Attorney stated the developer receives some financing from the }-IRA earlier than what is the norm. He suggested the possibility of the HRA advancing the funds, through bonds to relocate the people that are there, cover all of costs with some sort of mechanism, then turn in over to the developer and then the developer would construct the project and after the project is done, the tax increment would be paid. Basically, the City would pay a portion up front of the development. Acting Chairperson Hanus asked about the time period from when a possible bond generates money and sold to the time the increment money is generated. The City Attorney stated the time period would be handled by capitalized interest. The City Attorney further stated obtaining securities from the developer could reduce the risk for the City. These securities could include guarantees from individuals, mortgages on the properties, guarantees of the cash flow, and letters of credit. A letter of credit would be the most efficient. James Prosser of Ehlers & Associates, Inc. appreciated the City Attorney's summary. He further stated we could summarize by looking as if the HRA would essentially provide tax increment financing funds up front. These would be secured on the basis of the tax increment revenue to be generated from the project. The risk is the project fails and does not yield what is expected. The second option is pay-as-you-go approach. In this approach the developer would take the note and sell the note to different financial institutions and the risk is taken at that level. They would like to encourage developers to pay-as-you-go approach. Mr. Prosser stated the risk issue could be resolved by providing funds up front but not distribute them until a portion of the project has been completed. He continued to say there would be a pledge of less than 100 percent and this would be secured by appropriate means. He stated the preferred way is pay-as-you-go, but this way of not pledging the full amount, only a portion, might be the appropriate way to resolve these policy issues with the developer. The City Attorney suggested having to put up bonds for a portion of the redevelopment until the project is completed. Mr. Prosser agreed with the City Attorney. Acting Chairperson Hanus asked if as a matter of policy the pay-as-you-go was adopted, with other conditions attached to it. He would suggest a condition would be having an audit done to determine what the middle ground number would be calculated at that point in time. Mr. Prosser agreed with Acting Chairperson Hanus and stated this would be an appropriate idea. Acting Chairperson Hanus suggested then the only way the HRA would contribute would be to have an audit performed on the developer. Mr. Prosser stated there would be a maximum number that could be identified at some later point. Acting Chairperson Hanus asked Mr. Prosser what action he would like the HRA Board to take tonight. 3 It jl I I I Id, l,~l I ,~, MOUND HRA MINUTES - APRIL 11, 2000 Mr. Prosser stated he would like some policy direction regarding looking at something other than strict pay-as-you-go financial method. He noted the HRA would like three tests performed with regard to the financing situation which include addressing the risk of project being completed, addressing the risk of future tax increment proceeds, and the need for the up-front assistance. Mr. Prosser stated this is not a binding agreement. Bill Beard, Mound Mainstreet, Inc., stated he is aware of the process being presented. Mr. Beard stated they cannot fulfill projects on a pay-as-you-go method and are comfortable with the other financial means of worldng out this project. HRA Board Member Ahrens stated there appears to be no other alternative if the developer cannot use the less risk method of pay-as-you-go. The City Attorney stated the City could proceed and look into other developers, but at this point in time, that may not be suggested. The City Attorney presented the second part of the policy concern the developer had and this involves the relationship of Lake Langdon and Auditor's Road. He stated the revised development agreement both separates and links the two developments. He stated they are separated in the sense that Lake Langdon is expected to precede Auditor's Road; and linked to the extent that the developer retains the right and the obligation to also do Auditor's Road. One effect is to lock up Auditor's Road for an additional period of time. The developer also can transfer one or both of the developments to others (provided certain conditions are met). It was be best to link these projects because of the tax increment implications. James Prosser recommended the agreement be drafted in such a manner that only increment necessary for the Lake Langdon project be provided for that project and any excess would be available for Auditor's Road. He suggested doing a rate of return analysis to help support this thought. The analysis looks at acquisition costs, relocations, revenue from sale of property, the tax increment that will be determined and determine the rate of return and level of risk. Mr. Prosser stated they would appropriate a rate of return and then the tax increment for the project. He suggested a policy decision could state a penalty if the developer does not go through the second phase. Mr. Prosser does not want the penalty phase because if the developer does not develop the second phase, it would tie up the project. The City Attorney stated the developer continues to remain in compliance with the agreement and has the right to developer Auditor's Road. Acting Chairperson Hanus stated he is hearing around town that Lake Langdon would get developed and then Auditor's Road would not because of risk factors and more expensive regarding TIF. He further stated he would like to have these two projects more than just linked, like required, but now he has heard tonight that this may not be a good idea because of unforeseen problems that may arise. HRA Board Member Ahrens agreed. 4 Ii J~ it & I nd, i,, ,k i ,~ , MOUND HRA MINUTES - APRIL I I, 2000 HRA Board Member Brown stated he does agree with Acting Chairperson Flanus, but he is concerned about legal issues that may arise when these two projects are linked. The City Attorney stated it would be worded in the agreement properly to alleviate legal concerns. Mr. Beard stated he does not see a problem at this point with finishing both projects. He further stated he would like to live up to what the customers want, as well as what the City would like, regarding the Langdon and Auditor's Road project. HRA Board Member Weycker asked why is the City separating the two projects. The City Attorney stated Auditor's Road would not be available for construction for a couple of years. He further stated there needs to be a commitment to Langdon now, but needs to protect the time gap as present regarding Auditor's Road. Acting Chairperson Hanus asked why it is not possible to attach at least half of the Auditor's Road section and complete both Langdon and this portion at the same time. Mr. Beard stated there are a whole lot of infrastructures that cause this problem, although, there may be a building that could overlap this development and cause a portion of Auditor's to be developed at the same time. Acting Chairperson Hanus stated if it is possible to create this situation, he would like to have this happen with the project. The City Attorney represented this agreement might be finalized within one month if all other contingencies have been agreed upon. Pat Meisel returned as Chairperson of the HRA at 7:14 p.m. 1.2 REVIEW OF MOUND FAMILY HARDWARE DEVELOPMENT AGREEMENT. The City Attorney stated the City has visited with the Dodd's and reached an agreement of a specific contract. He further stated the contract would be presented to the HRA within two weeks and is hopeful it would be approved. HRA Board Member Brown asked with all of the swapping of land going on, when would this be presented to the Planning Commission. Mound's Vision Coordinator stated it would be presented to the Planning Commission on May 8, 2000. James Prosser stated specifically the zoning is the development agreement would provide a period of time during which certain things are done, and they are not assuming this is rezoned and are not taking the Planning Commission for granted. He stated there needs to be a starting point in all projects. 5 MOUND HRA MINUTES - APRIL 11, 2000 Mound's Vision Coordinator stated the project to his knowledge does not require a rezoning and does not require a variance. He stated the only issue is a major subdivision for the Planning Commission to review. 1.3 DISCUSSION - POST OFFICE RELOCATION. Mr. Prosser stated the HRA has provided a number of acceptable parcels for the post office and those were presented to the post office with a broker who was assisting the post office at the time. He stated the post office appears to be in a position to indicate its favorite site. He would like to the HRA's authorization to take the necessary steps to secure this position and have the property acquired. Mr. Prosser proposed this action would be completed in the next week. Mr. Prosser received from the HRA the authorization to go ahead and complete this project. INFORMATION/MISCELLANEOUS. 1. Letter dated April 4, 2000, from the Netka's. HRA Board Member Weycker suggested checking into relocation specialties and would like this investigated by staff. Mr. Prosser stated it would be appropriate to identify relocation specialists, so a meeting could be planned as soon as the redevelopment agreement has been signed. Prosser stated this would be a major impact on businesses and he would like to assist when this happens as much as possible. HRA Board Member Weycker suggested notifying the business owners this step would be coming shortly. Sally Custer/Glass Plus, 5310 Bartlett/5533 Shoreline. Ms. Custer asked the HRA if a business owner has the right to keep the property in the redevelopment area as long as they conform to the image of the proposed downtown. Ms. Custer presented her drawing to the HRA and the public of what she would like her business to represent. Mr. Prosser stated there are certain goals attempting to be achieved by the developer. He stated the developer has been assigned exclusive rights, but this includes working with existing businesses to include projects that are presented to the developer. He stated it would be appropriate to direct owners to work with he developer. He suggested he not independently assist with this project, but would if there is disagreement between the business owner and the developer. Ken Custer/Glass Plus/5310 Bartlett/5533 Shoreline. Mr. Custer stated it seemed logical to split the two projects (meaning Langdon and Auditor's Road) in half to have a less financial 6 II ,Il, I I I ,IL ,I, ,i I ,[ , MOUND HRA MINUTES - APRIL 11, 2000 rigk for the City of Mound. I. Ie further gtated any left over fundg e0uld be written into the agreement and stated they would be used for the Auditor's Road project. He would suggest the pay-as-you-go method to minimize more risk to the City. He does not want to see taxes increased to an extreme amount. He would like an open forum before the contract has been finalized to discuss with the business owners what they would feel would be best for the City of Mound. The City Attorney stated he appreciated the suggestion. He stated the pay-as-you-go method is a good choice because they can take a note and get the loan from the bank. He further stated a problem that arises is the cost of site assembly in such large amounts that the revenue that would be generated from the development would not be sufficient. Mr. Custer suggested that there must be a formula for allocating a certain amount of dollars per square foot, knowing the Auditor's Road project will be more expensive than the Lake Langdon project. The City Attorney wanted to clarify this statement. When referring to "more expensive" it refers to one having a better rate of return on the Langdon versus the Auditor's Road. Dorothy Netka, 2360 Commerce Boulevard. Ms. Netka is not comfortable with having an agreement signed that specifies how her property should be situated without a consultation with her first. She strongly suggested conferring with the business owners to see what their prospective of what could be happening to the property versus having the developer tell the City what would be happening to the property. She would like the business names made public that are going to be affected by this redevelopment project. The City Attorney strongly suggested that Ms. Netka have conversations with the developer about her concerns. Ms. Custer is confused on the role and who is the actual "boss" of the project. She stressed that she felt the City Council should be approaching the developer and saying how they would like their City to be built, and not the reverse. Chairperson Meisel stated this has been a vision for 9 years and the business have been aware of this process for that long of timer period. She stated there is a concept or preliminary agreement with the developer and she would encourage the people to work with the developer rather than the City at this point. Mr. Prosser stated this is a difficult issue when looking at a redevelopment project. He stated there are major issues and it is clearly the responsibility to look at the long-term liability and have the commercial areas in a position for a good future. He stated for redevelopment to occur in this area, essentially there has to be a large enough area be redevelopment at one time in order to change that momentum and get banks willing to invest money at a much higher level. He further stated he does realize this would provide 7 MOUND HRA MINUTES - APRIL 11, 2000 hardships to some business owners and that is where the Cit~/Council needs to stel~ in and say something. Ms. Custer asked if we would have been in the same position two years ago. Chairperson Meisel stated this project has been going on for the past two years, although, the TIF situation is new to the project. Michael Durrell, representing Mrs. Moy at 5555 Shoreline Boulevard. He stated Mrs. Moy could not be present tonight so he is attending on her behalf. He stated one item that has not been addressed is the consideration of the businesses that have been keeping the City of Mound a functioning city. He strongly stated the City needs to acknowledge all businesses in Mound and allow the people to be heard regarding the redevelopment project and what they would like to see done with their business. HRA Board Member Brown stated the EDC is made up of business district members and the businesses have been aware of this project for some time. He further stated the EDC meetings are open to the public. HRA Board Member Brown stated surveys were sent out and opinions were brought back to the EDC from business owners in the past. HRA Board Member Weycker suggested having a meeting the first week in May, 2000. Mr. Durrell would appreciate a poll taken from the business owners to see what they would like to have done with their town. Chairperson Meisel will take Mr. Durrell's suggestion under advisement and discussions could be further advanced at a possible COW meeting. ADJOURNMENT. MOTION by Ahrens, seconded by Brown, to adjourn the meeting at 7:55 p.m. The vote was unanimously in favor. Motion carried. 5-0. Fran Clark, Acting City Manager Attest: Chairperson Meisel 8